How a buiness is organized often greatly influences it's ability to secure capitalization.  As a general rule, it is easier for a corporation to raise capital than it is for a partnership or proprietorship.  A corporation usually has greater credibility with the public.  Investors and lenders are often more likely to put money into a corporation, when compared to a proprietorship or partnership.  A corporation, on the other hand, can not only borrow money, it can also issue stock, bonds, or other types of financial instruments, as permitted by the general corporation law in it’s state of domicile.  A corporation, being a legal entity, is responsible for it’s own actions.  Shareholders can invest in it without being held liable for the corporation's decisions, or debt.

 

Investment in a partnership or proprietorship is usually limited to the owner’s assets, the income the business produces, or borrowing money from family, friends, or lenders, and the owners are liable for company decisions and financial liabilities. 

 

In terms of value, sole-proprietorship or partnership businesses are usually sold for one to two times annual earnings, whereas corporations are often valued at between 12 to 25 times annual earnings or more.